Last year, Bubbakoo's Burritos planned to open a dozen restaurants in 2018, but after the new federal tax law was signed into law, co-founder Paul Altero thought about growing faster.

Even two extra restaurants would translate to as many as 40 full- and part-time employees, not to mention construction workers needed to get the sites going.

"The short of it is, we're a small- to medium-sized business," Altero said. "When we have the capital, we reinvest. That's important to us."

New Jersey business owners are eager to take advantage of the federal tax law that came with steep cuts to corporate and some small business taxes. It carries the promise of an extra pot of money that could help them chip away at a wish list that has been building for decades.

The potential benefits, though, have no shortage of skeptics who think the economic impact will be modest. They note, for example, that the unemployment rate already is low. And they wonder how much the tax cuts will help businesses' customers and increase demand.

"They’ll hire more employees if they have more people eating at their restaurant," said Steven Pressman, a former professor of finance and economics at Monmouth University in West Long Branch. "The big problem with the tax bill is the average worker gets little or nothing."

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Started in 2008 in Point Pleasant, Bubbakoo's Burritos is expanding at a quick pace.
David P. Willis

Tax law's biggest winners

Signed by President Donald Trump before Christmas, the Tax Cuts and Jobs Act marked the first overhaul of the U.S. tax code since 1981. Among the provisions: It reduced the top corporate income tax rate from 35 percent to 21 percent. And it reduced income taxes for some small businesses.

It validated the business community's optimism. Even before the law was passed, some 54 percent of businesses said the outlook for the U.S. economy was better, up from 29 percent when the question was asked before the presidential election in 2016, according to a survey by the New Jersey Business and Industry Association, a business lobby group.

Accountants sifting through the details, though, said the tax cuts' benefits weren't universal.

Consider pass-through businesses, like Limited Liability Corporations and S Corporations, whose owners pay taxes at individual income rates. Professional services businesses such as doctors, lawyers, accountants and consultants aren't eligible for a deduction that's available to other pass-through businesses. But they get lower tax rates nonetheless.

"No business will not benefit,” said Jack Oujo, an accountant and financial adviser in Wall, before adding that he planned to search for ways to become eligible for the deduction. "2018 is going to be a year to review and study."

It leaves many business owners in the position of Adam Taylor, who owns Splendor Design Group, a digital marketing company in Red Bank.

Taylor started the company in 1999, but its sales have grown 25 percent each of the past three years thanks to a resurgent economy. It has hired three employees in the past 14 months, and now has seven.

Taylor has an LLC, and he isn't sure how much the tax bill will save him — or what he would do with the money. He hasn't given himself a raise in three or four years, he said. But he knows his company would benefit for a couple more talented employees.

"We've always been slow and steady growth and now its gotten to a point where we needed more services, more capabilities, more expertise on our team to handle the bigger, complex accounts and projects," Taylor said. Watch the video above to hear about Taylor's plans.

Frank McClintic, president and chief executive officer of MaxFlight Corp., a Toms River manufacturer, will see his top rates slashed, although he had hoped Washington would have gone even lower.

Now, he plans to wait. How much will the tax break leave him? How will New Jersey respond? In 2019, he said, he'll have a better idea and will consider his options.

"If you spur economic activity and allow businesses to grow, as they grow they create jobs," he said. "As they create jobs there are shortages of people to do those jobs. And wages go up."

The tax cuts amount to $1.5 trillion over 10 years, enough to easily make up the revenue that it lost thanks to a jolt it would give the economy, U.S. Treasury Secretary Steven Mnuchin said during a visit to Berkeley Township in November.

And it got off to a flashy start. Wells Fargo and Toms River-based OceanFirst Financial Corp. said they would use part of their savings to increase the minimum wage of employees to $15 an hour. Comcast and AT&T said they would give employees $1,000 bonuses.

Adding heat to a hot economy

Many economists aren't sold on the law's long-term effects. Moody's Analytics said it would lift economic growth next year by 0.4 percentage points and another 0.2 percentage points in 2019, bringing annual growth close to 3 percent.

But instead of paying for itself, the law is expected to cause the deficit to exceed $1 trillion, causing interest rates to rise and washing out the economic benefits by making it more expensive to borrow, Moody's economists said.

Tax cuts would have a bigger impact, experts said, if the economy was sliding. But the U.S. unemployment rate was 4.1 percent in November, the lowest since the technology bubble in 2000.

New Jersey's unemployment rate was 5.1 percent in November, but some employers in the Garden State have said it is difficult to fill open positions.

"I’m a little cynical about (the law's effect)," said Joel Naroff, an economist based in Holland, Pennsylvania, who follows New Jersey. "The problem now is not a lack of demand for workers, it’s the lack of supply of workers. If they are growing faster, where can they find even more qualified workers?"

What to do with the extra cash

While some companies boasted of increasing their minimum wages, others said they planned to return the extra money to shareholders. Pfizer, for example, increased its dividend 6 percent and authorized spending $10 billion to buy back its own stock.

That's in addition to $6.4 billion remaining from a previous plan to buy back stock, the company said.

Businesses "are going to derive this benefit, and they are very, very thankful," William McDevitt, an accountant with Wilkin & Guttenplan in East Brunswick, said of his clients. "The question is, what are they going to do with the extra cash flow?”

Bubbakoo's Burritos has expanded both by opening its own stores and franchises. Last year, the company spent $90,000 on two cargo vans to take advantage of tax incentives, Paul Altero said.

It no doubt helped the van manufacturer, but even though Bubbakoo's catering business is growing, Altero said the restaurant probably could have lived without them.

"The advantage to the new tax bill is we don’t really have to jump through those loopholes anymore in order to see any tax advantage," he said.

Attention NJ business owners and professionals -- and anyone who just loves shopping at the Shore: Business reporter Mike Diamond and Press on Your Side's David P. Willis are your number one source for all things business and retail in New Jersey.?